Five years’ porridge for delivering a pizza: National Security Bill still causes concern

18 Apr 2023

DRD Partner, Jon McLeod, reports on the far-reaching provisions of the National Security Bill’s Foreign Influence Registration Scheme.

We all have concerns about the poor quality of some pizza delivery services, but five years’ prison seems a bit harsh.

However, that is exactly the risk run by the purveyors of the nation’s favourite fast food should they fall foul of the provisions of the National Security Bill, which will return to the House of Commons this Spring for consideration of amendments made in the House of Lords.

Part three of the Bill establishes a new Foreign Activities and Foreign Influence Registration Scheme. It was introduced in the Commons’ stages of the Bill late in 2022 with scant consultation.

There are limited exemptions. Ireland does not count as foreign, but the Channel Islands might. Lawyers have been excluded for legally privileged services, there is some protection for journalistic sources, but other sectors or activities are all caught. FIRS will underpinned by transparency provisions requiring disclosure and public registration, the details of which have been trailed by Ministers in papers placed in the House of Lords.

Following an excellent series of representations made to Peers by many, notably James Palmer and Paul Butcher of Herbert Smith Freehills (HSF), Ministers have happily stepped back from the brink on some of the worst aspects of the draft law.

The basic, ‘primary’ FIRS provisions will now require the registration of arrangements to carry out political influence activities in the UK only when this is at the direction of a foreign power, which is defined as:

  • The sovereign or other head of a foreign State in their public capacity
  • A foreign government, or part of a foreign government
  • An agency or authority of a foreign government, or of part of a foreign government
  • An authority responsible for administering the affairs of an area within a foreign country or territory, or persons exercising the functions of such an authority
  • A political party which is a governing party of a foreign government.

An ‘enhanced’ tier of FIRS gives the Secretary of State the power to require registration of a broader range of activities for specified countries, parts of countries or foreign government-controlled entities where this deemed necessary to protect the safety of interests of the UK.

According to HSF: “The public registration requirements of the scheme will no longer fall on those being directed by an indiscriminate range of foreign entities (eg, foreign-registered businesses, charities, NGOs and so on) and on those foreign entities themselves. Instead, the scheme has been helpfully narrowed to apply only where any entity is directed by a ‘foreign power’ to carry out political influence activities.”

Explaining recent changes to the draft law, the Government has said: “This will ensure the scheme does not disrupt the frequent and important engagement by foreign private and charitable organisations which contributes positively to UK policy-making. The amendments focus the scheme back on its original intention – the influence of foreign powers over UK democracy.”

There had been real concerns that the need to deal with genuine emerging threats from a handful of malign states had been met with an overblown and disproportionate response.

However, concerns do remain about the powers that are put in the hands of the Secretary of State – and the criminal sanctions that apply – in respect of the enhanced scheme.

The changes made in the House of Lords have left the enhanced tier broadly untouched. It applies to the extent that the Home Secretary specifies a foreign power, or entity other than a foreign power which is controlled by a foreign power, as being a ‘specified person’ under regulations.

“The concern remains that, as any activity whatsoever could be caught (e.g., supplying utilities, catering services or medical assistance – see briefing here) there is a risk of the innocent being criminalised with fines and up to five years’ imprisonment. This is because no attempt is made to define a national security focused scope of activities,” says the team at HSF.

There had been real concerns that the need to deal with genuine emerging threats from a handful of malign states had been met with an overblown and disproportionate response. However, concerns do remain about the powers that are put in the hands of the Secretary of State – and the criminal sanctions that apply – in respect of the enhanced scheme.

Jon McLeod, DRD Partner

The Government has sought to defend the revised approach to FIRS in the following terms:

“To avoid impeding spontaneous activity, political influence activities conducted as part of an arrangement with foreign powers may now take place without prior registration, providing that the arrangement is still registered within 28 days,” adding: “In order to ensure that individuals are not unfairly criminalised where they had conducted due diligence and believed an arrangement was registered, a defence of reasonable belief has been added to relevant offences.”

A key issue for those reviewing their compliance obligations will be whether or not they have been directed in their activities by a foreign power. Organisations which are owned or controlled by a third country will need to think hard about their public affairs activity in the UK, which could be criminalised if not registered.

A sovereign wealth fund might make independent investment decisions, whereas as state-controlled utility or transport company might struggle to argue that it is not directed in its actions by that foreign power. The implications for inward investment decision-making, and its complexity, are palpable.

So what of the hapless pizza firm? HSF’s worked example is salutary:

A foreign power (a country) is specified by the Secretary of State. The country has an embassy in the UK as well as owning directly an institute building where its nationals, visiting officials or employees often visit.

A, who runs a small pizza business, is aware the country has been the subject of UK Government criticism. A knows that A’s business has not registered (but is unaware of the detail).

A delivers pizza to the Institute pursuant to orders from a resident.  A has not registered; A is aware they have not registered their own business. A is aware they are taking an order from the Institute and the foreign power will pay the cost.  The conditions for an offence under clause 64(1) are therefore satisfied.  The pizza delivery company and driver do not fall within the exemption for “catering” services to diplomatic missions.